South Africa

Developers sign PPAs for first round projects after delays

SOUTH AFRICA: In November, after four months' delay, South African developers signed power purchase agreements (PPAs) for eight wind power projects totalling 634MW chosen under the first tender of the renewable energy independent power producers programme announced in December 2011.

This opened the way for developers to reach financial close and start construction. The wind industry has "achieved lift-off", said Johan van den Berg, CEO of the South African Wind Energy Association (SAWEA).

The process has been a steep learning curve for both the government and the industry. On the government side, the legal framework was found to be lacking, while the delays caused concern in the industry and difficulties for smaller firms that invested in conducting environmental impact assessments and other studies required in the permitting process. Now everyone is hoping that subsequent rounds will proceed more smoothly.

The developers also signed the implementation agreement, which ensures they adhere to their commitments regarding local content, job creation and benefits to local communities.

Power from all eight projects will be delivered at ZAR 1.14/kWh ($0.13/kWh). While South African utility Eskom's wholesale rate currently stands at around ZAR 0.66/kWh, the tariff is set to rise significantly over the next five years.

In return, the developers have promised to create 2,307 jobs in the construction phase and 2,550 in operations, the energy ministry said. Of these, 1,858 construction jobs and 111 in operations are for South Africans, with 1,369 and 73 respectively reserved for black citizens. At least 1% of revenue must be spent on social economic development.

The first projects from the first round are scheduled to be completed in late 2013 or early 2014. Another 562MW selected in the second round are due to reach financial close in March, followed by a third bidding window in May.

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